Oil Supply/Demand Report FY 1H 2016

June 2016 actual crudes and petroleum products inventory closed at 19,888 thousand barrels (MB) or 50-day supply equivalent; 40 days for crude oil and products in country stocks and 10 days in-transit. This was higher by 14.4 percent from June 2015 level of 17,382 MB. YTD June 2016 average inventory was recorded at 45 days, 38 days in country stock and 7 days in-transit.

The government continued to enforce the Minimum Inventory Requirement (MIR) given the continuing risks faced by the downstream oil industry sector such as geopolitical instability and supply delivery problems to areas affected by calamities (e.g. typhoon, flood, earthquake, etc.).

Current MIR for refiners is in-country stocks equivalent to 30 days while an equivalent of 15 days stock is required for the bulk marketers and 7 days for the LPG players.

Crude Oil Supply

Various types of crude oil imported for the period totaled 37,941 MB, a slight decrease of 0.9 percent from first half of 2015’s 38,294 MB.

About eighty-five percent of the total crude mix (32,163 MB) originated from the Middle

East, of which 34.7 percent (13,164 MB) was sourced from Kuwait, replacing Saudi Arabia as top supplier of crude oil into the country. On the other hand, 3,434 MB of crude oil was imported from the ASEAN and from local production equivalent to 9.1 percent of the total crude mix. The remaining 6.2 percent (2,343 MB) was sourced from Russia (Fig. 1).

The other industry players accounted for majority of the product imports with 71.4 percent of the total imports volume, up by 13.6 percent to 31,419 MB from 1H 2015’s 27,658 MB. The oil majors (Petron, Chevron and Pilipinas Shell) accounted for the remaining 28.6 percent which increased by 29.3 percent from 1H 2015’s 9,752 MB to 12,608 MB.

The local refiners (Petron and Pilipinas Shell) accounted for 17.5 percent of the total product imports, which included blending stocks, as against 82.5 percent share by direct importers.

Total gasoline import reached 44.4 percent of gasoline demand while diesel oil import was 55.7 percent of diesel demand. LPG import on the other hand, was 69.5 percent of LPG demand. Total product import was 54.8 percent of the total products demand.

The oil majors’ import share in the total demand was 15.7 percent while the other players’ import share was at 39.1 percent. As for the refiners, their import share in the total demand was 9.6 percent, while 45.2 percent was attributed to direct importers.

Meanwhile, a total of 642 MB ethanol was imported for fuel use during the first half of 2016, which dropped by 26.8 percent from 877 MB of 1H 2015 (Table 3f). Republic Act No. 9367 of 2007 mandated that all gasoline to be sold in the country should be E-10 (gasoline with 10% bioethanol content).

Crude Run and Refinery Production

The country’s current maximum working crude distillation capacity is 285 thousand barrels per stream day (MBSD).

Total crude processed as of first half 2016 slightly rose by 1.0 percent from 39,191 MB of 1H 2015 to 39,580 MB (Table 5). The increment may be due to increased refinery utilization during the period which grew also from 75.9 percent of last year to 76.3 percent this year.

Consequently, local petroleum refinery production output also went up by 2.3 percent from 38,167 MB to 39,036 MB. First half 2016 average refining output was at 214.5 MB per day.

Vis-à-vis first half of 2015, gasoline output posted an increase of 20.0 percent which may be attributed to the newly expanded refinery of one local refiner which is now capable of producing more white products.

Kerosene/avturbo output also rose by 3.2 percent. However, diesel oil output dropped by 2.5 percent. LPG and fuel oil output also went down by 6.7 and 1.8 percent, respectively.

Diesel oil continued to dominate the production mix with a share of 37.9 percent, followed by gasoline and kerosene/avturbo with 24.2 and 10.5 percent shares, respectively. Meanwhile, fuel oil and LPG got 7.6 and 6.5 shares, respectively (Fig. 2).

DEMAND

Petroleum Product Demand

First half 2016 total demand of finished petroleum products grew by 13.0 percent to 80,382 MB from 71,103 MB of 1H 2015. This can be translated to an average daily requirement of 441.7 MB compared with last year’s level of 392.8 MB.

Compared with first half of 2015 figures, diesel oil demand posted an increase of 16.2 percent. Fuel oil demand was also up by 17.0 percent. Gasoline, LPG and kerosene/avtubo demand also grew by 12.9, 9.6 and 9.2 percent, respectively. Likewise, naphtha demand went up by 10.9 percent.

Total country’s petroleum products exported for the first half of 2016 increased by 23.1 percent from 5,444 MB of 1H 2015 to 6,700 MB this year.

Export of fuel oil posted a huge increase of 402.7 percent from 200 MB of last year to 1,006 MB this year. Gasoline was also up by more than a 100 percent. Likewise, condensate export grew by 15.8 percent from last year’s level. On the other hand, naphtha export dropped by 23.1 percent vis-à-vis first half of 2015. Petrochem products such as propylene, mixed xylene, benzene and toluene were down by 53.5, 35.2, 21.0 and 5.6 percent, respectively.

Meanwhile, the local refiners (Petron Corp. and Pilipinas Shell) captured 50.5 percent of the total market demand while 49.5 percent was credited to direct importers/distributors.

LPG

The other players’ market share, with the inclusion of Isla Gas and South Pacific, increased to 61.4 percent. The remaining 38.6 percent was credited to the oil refiners.

Among the other LPG players, Liquigaz got the biggest market share with a 25.9 percent share, followed by Isla Gas with a share of 13.5 percent. Next was Prycegas with a share of 12.5 percent (Fig. 4).

OIL IMPORT BILL

First half 2016 estimated total oil import bill amounting to $3,388.6 million was down by 28.9 percent from 1H 2015’s $4,768.8 million. This was attributed to lower import cost (for both crude and petroleum products) although petroleum product import volume increased.

Total oil import cost was made up of 57.6 percent finished products and 42.4 percent crude oil.

Total import of crude oil which amounted to $1,435.6 million dropped by 37.2 percent from $2,284.8 million of 1H 2015 due to lower CIF price per barrel from 2015’s $59.664/bbl to $37.837/bbl.

Meanwhile, total product import cost dropped by 21.4 percent to $1,953.0 million at an average CIF cost of $44.36/bbl vis-à-vis 2015’s $2,484.0 million at an average CIF cost of $66.40/bbl. Average dollar rate for 1H 2016 is $46.90 compared to 1H 2015’s average rate of $44.55.

On the other hand, the country’s petroleum exports earnings for the period fell by 24.3 percent from $417.9 million of 1H 2015 to $316.2 million this year.

Overall, the country’s 1H 2016 net oil import bill amounting to $3,072.3 million was down by 29.4 percent from 1H 2015’s $4,350.9 million due to cheaper price per barrel of crude and petroleum products (about 35.0 percent) vis-à-vis last year.